Labor calls for Centrelink's 'crude and inaccurate' automated debt recovery system to be scrapped

Labor has joined calls for Centrelink's automated debt recovery system to be halted or scrapped, amid reports low-income Australians are wrongly receiving letters of demand for thousands of dollars in possible overpayments.

Changes in the federal government agency's compliance processes in July have seen welfare recipients' Centrelink records compared with other government records, including reported income information collected by the Australian Tax Office.

Recipients of contested welfare payments are given three weeks to establish their eligibility to have received the payments.Credit:Marina Neil

The Australian Council of Social Service and some MPs have criticised the processes after some Centrelink clients reported receiving computer-generated letters demanding thousand in repayments during the Christmas period, many of which could be in error.

Recipients of contested welfare payments are given three weeks to establish their eligibility to have received the payments.

The automated system replaces manual processes previously used by the agency.

On Thursday, Labor's acting human services spokesman Doug Cameron said one Centrelink client had shown him a debt recovery notice for more than $9000, despite her "meticulous reporting".

He slammed the government for using a "dragnet approach" to welfare recovery for thousands of Australians.

"This is a crude and inaccurate approach with data matching, it's very crude and very inaccurate and we think it should stop," he said on ABC radio.

"I don't have any data on it but I know the anecdotal evidence is quite compelling and that is that many, many people, innocent Australians going about their business... are getting a bill leading up to the Christmas period."

Senator Cameron said Centrelink should urgently review the process to avoid further mistakes.

"We think it should be scrapped or certainly it should be suspended because we've already got a Centrelink whistleblower who manages this program saying it is grossly unfair, flawed and overly harsh, error prone and compliance staff have no discretion to deal with the issues."

Human Services Minister Alan Tudge said this month the number of discrepancies identified had shot up from about 20,000 each year to the same number in an average week.

Mr Tudge said that Australians who rort Centrelink payments were at risk of prison time.

"We'll find you, we'll track you down and you will have to repay those debts and you may end up in prison," he told Channel Nine.

Department of Human Services general manager Hank Jongen said he was confident in the online compliance system and associated checking processes.

"Over 70 per cent of people who received an online compliance letter since September this year have completely resolved the matter.

"Only 2.2 per cent of customers were requested to supply supporting documentation, which means 97.8 per cent of customers did not need to supply supporting documentation."

While staff have previously used manual checks to compare customer records with data from other government agencies, new online compliance systems have automated part of the process.

Mr Jongen said no changes have been made to how income is assessed or how debts are calculated.

When data discrepancies are detected, a letter is sent to advise recipients and seek confirmation or further information online, with reminders sent two weeks later where no response is received.

"These are not debt letters and at this stage of the process no debt has been raised," Mr Jongen said.

"People have 21 days from the date of their letter to go online and update their information. It's also possible to seek an extension and provide new information if people didn't get it right the first time.

"The department is determined to ensure that people get what they are entitled to, nothing more, nothing less."